“The cheque’s in the mail”: reducing the risk of late payment

“The cheque’s in the mail”: reducing the risk of late payment

cheques in the mailChasing up overdue accounts and trying to manage defaulting customers is never fun, nor is it easy. Your efforts and resources are better spent in sourcing new business, delivering on your clients expectations and doing what you do best.

These simple tips will help mitigate the stress caused by late payments, keep your cash flow ticking over and free up way more time to be making money, and not chasing it!

Do your homework

Check the facts and figures for both new and existing customers and conduct credit checks not only at the commencement of your business relationship, but at later stages should they request for instance an increase in credit limit, further credit facilities or a change in their Terms and Conditions. It may also pay to re-check the information should there be any signs of default or breach of terms as this may alert you to issues that will impact your account at a later date.

Terms and Conditions

Ensure that your trading and payment terms are clear and there can be no confusion or ambiguity as to when payment is due. Comprehensive terms relevant to and appropriate for your business will ensure that late payers have little leeway with which to argue or offer excuses over late payment. It is important to review your T&C’s at at least annually to ensure that they remain current and relevant to your industry and market.

Reduce the risks of non-payment

Get yourself some ‘insurance’ against the risk of payment default by obtaining payment in advance, or a deposit on goods or services rendered. Personal guarantees can come in handy if obtained and documented correctly. And talking of insurance, trade credit insurance can be a good idea if suited to your business as this will ensure that your cash flow is protected in cases of serious delinquency or default.

Follow up accounts falling due promptly

The probability of collecting outstanding accounts in full decreases as an account gets older. Good accounts receivable processes that address late payments quickly will reduce instances of delinquency or default and keep your cash flow healthy. Payment due reminders, courtesy calls (or an SMS) and account alerts are all good measures to employ if resourcing permits.

Be assertive and authoritative

Chances are if you let a customer pay late once, they will do it again (and again!). Stay firm and assertive, refer them to your terms and conditions and do not be afraid to advise them of the consequences (placing a stop on their account, suspending services or applying penalty rates or interest) of delinquency. It is important here that you follow through on your warnings and actually enforce the consequences to maintain your position of authority.

Use a debt collector

At the right time and with the right message, the employment of collection agent can be a very powerful tool to ensure your receivables are managed effectively. Look for an agent who has expertise and experience in your area, with the ability to customize collections solutions (and pricing!) to fit your product or service, brand and business model.

Troy Mulder is the Executive Director of Credit Solutions (WA ) Pty Ltd, a premium provider of fully outsourced receivables management, debt recovery and legal services across all stages of the credit life cycle. To find out how Credit Solutions (WA) Pty Ltd can help your business with collecting your overdue accounts, reviewing your Terms and Conditions, credit checking or stress testing your receivables management processes call us now on 1300 873 265 or email Troy at tmulder@creditsolutions.net.au

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